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OPEN VERSUS CLOSED FIRMS AND THE DYNAMICS OF INDUSTRY EVOLUTION -super-*

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  • ASHISH ARORA
  • FARASAT A. S. BOKHARI

Abstract

We develop a model of industry evolution in which firms choose proprietary standards (closed firm) or adopt a common standard (open firm). A closed entrant can capture multiple profits whereas an open entrant faces lower entry barriers: The odds of closed entry (relative to open entry) decrease with price and eventually open entry becomes more likely. While initially closed firms have better survival because they can offset losses in one component with profits from another, the situation is reversed when prices fall below a threshold. These entry and exit dynamics can lead the industry away from its long run equilibrium. Copyright 2007 Blackwell Publishing Ltd..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 55 (2007)
Issue (Month): 3 (09)
Pages: 499-527

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Handle: RePEc:bla:jindec:v:55:y:2007:i:3:p:499-527

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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Cited by:
  1. Éric Darmon & Dominique TORRE, 2014. "Open Source, Dual Licensing and Software Competition," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201405, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  2. Selam Abrham Gebregiorgis & Jorn Altmann, 2012. "IT Service Platforms: Their Value Creation Model and the Impact of their Level of Openness on their Adoption," TEMEP Discussion Papers 201295, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jun 2012.
  3. Llanes, Gastón & de Elejalde, Ramiro, 2013. "Industry equilibrium with open-source and proprietary firms," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 36-49.

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